US president Joe Biden “stresses that Silicon Valley Bank is not getting a bailout,” The Hill reported on March 13.

“[N]o losses will be borne by the taxpayers,” he said of the federal government’s decision to cover depositor losses in excess of  $250,000.  “Instead, the money will come from the fees that banks pay into the Deposit Insurance Fund.”

But Biden’s explanation doesn’t support Biden’s claim. The bank’s customers — and, by extension, the bank itself — are definitely getting a bailout. Here’s why:

The FDIC is, as its name implies, an insurance proposition. The premiums banks pay are based on the amounts they have in deposits, and an FDIC opinion of how risky the bank’s practices are.

Let us now turn our attention to a great film about the LAST big US financial collapse, The Big Short. By way of explaining his pitch for betting that collapse was coming, Jared Vennett (a fictional character based on a real person) tells some investors, “I’m standing in front of a burning house and I’m offering you fire insurance on it.”

In the case of Silicon Valley Bank, Signature Bank, and likely other banks to follow, the FDIC is standing in front of burning multi-million dollar houses insured for $250,000 and offering to pay the full value of the houses instead of the amount insured.

Who’s covering the difference?

For the moment, all the banks which haven’t collapsed yet.

Which means: The CUSTOMERS of all the banks which haven’t collapsed yet. It’s those customers who actually pay those FDIC premiums. Banks don’t turn profits by eating their costs of doing business. Depositors earn a little less interest or pay slightly higher fees, or the bank charges borrowers higher interest and fees.

Those customers are, presumably, taxpayers.

Which means that yes, taxpayers are indirectly bearing the costs of the bailout.

And if — no, let’s be honest, WHEN — more banks start going under because they put money into investments that tanked their liquidity (that is, their ability to cover potential surges in depositor withdrawals), and the FDIC runs out of money to cover this new “any amount instead of just what was actually insured” policy, the taxpayer funding will go from indirect to direct.

To add insult to injury, the depositors getting bailed out could have avoided the whole situation by spreading their deposits across different banks, with no more than $250,000 at each bank.

Why should their bad judgment, and their bankers’ bad judgment, be expensed to you?

It shouldn’t. But as we saw with the 2007-2008 collapse, American finance is a house of cards because it can be.  “Privatize the profits, socialize the losses” government policy ensures that the costs of poor decision-making aren’t borne by the poor decision-makers.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

PUBLICATION/CITATION HISTORY

Former Arkansas governor Asa Hutchinson tells USA Today that former president Donald Trump should abandon his 2024 campaign to re-take the White House if he’s indicted: “It doesn’t mean that he’s guilty of it or he should be charged, but it’s just such a distraction that would be unnecessary for somebody who’s seeking the highest office in the land.”

Is Hutchinson right? Maybe. Does Hutchinson — who’s been talked up for years as a possible presidential candidate — have ambitions that Trump’s departure from the field would serve, or is he just doing the “elder statesman” thing out of concern for his party’s prospects? Either could be true.

My view:

If there’s probable cause to believe Trump committed crimes, he should be charged and prosecuted. Prosecutors in New York and Georgia may make their moves soon, and special counsel Jack Smith could conceivably recommend charges relating to the January 6, 2021, Capitol riot.

But, buyers beware: That’s exactly what Trump wants.

After a presidency full of outcomes ranging from mediocre (for example, tax policy, desultory stabs at deregulation, mostly unfulfilled lunges toward a less interventionist foreign policy) to disastrous (his trade wars and border wall schemes come to mind), and with an unprecedented two impeachments under his belt, Trump has only one trump card left in his hand to keep his considerable base energized and mobilized.

That trump card is the victim card. The martyr card. The “stolen election” card. The “witch hunt” card.

He’s played that card to the tune of hundreds of millions of dollars in fundraising and cataclysmic effects on the Republican Party’s fortunes, nearly single-handedly turning  a 2022 “red wave” into a “red trickle.”

If he continues to play at all, his only available strategy is to keep  waving that card around and asking his supporters to double down with their bets on it.

Will that strategy work?

If past trends indicate future performance, probably not. He barely beat an exceedingly weak opponent in 2016, lost in 2020, and cost his party dearly in the 2018 and 2022 midterms, playing that card every time as his vaunted supporter rally turnout shrank from stadium overflows to a half-filled room at CPAC in early March.

But he’s been under-estimated before, and actual criminal indictments will likely affect that trump card the way gasoline affects a bonfire. Even if he can’t win the presidency, he can turn 2024 into a circus the likes of which we’ve never really seen.

Personally, I find that kind of appealing.

Yes, he’s a crook.

So were his predecessors.

So is his successor.

Having it out with Trump may not bring our rotten, corrupt political class crashing down, but exposing him exposes them, too. And it’s better to get such things out in the open.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

PUBLICATION/CITATION HISTORY

Capitol Hill’s drug warriors self-injected their latest fix of high dudgeon  in early March, after the abduction of four Americans — two of whom were subsequently murdered — by drug traffickers in Mexico. On March 8, US Senators Roger Marshall (R-KS) and Rick Scott (F-FL) announced proposed legislation to designate Mexican drug cartels as “terrorist organizations.”

Marshall admitted more than he probably intended on the subject when he described the abductions/murders as “a tragedy and a symptom of a larger problem stemming from the culture supported by our national leadership.”

Why do Mexican drug cartels exist? Why do they smuggle cocaine, heroin, and other substances into the US? Why are they willing to kill to protect their turf and snuff out competition?

Because, as Willie Sutton supposedly said when asked why he robbed banks, “that’s where the money is.”

Why is that where the money is?

Because politicians like Roger Marshall and Rick Scott want it there, that’s why.

After a century of the “war on drugs,” a few lessons which were obvious from its beginning remain glaringly so.

Lesson 1: Some people like to use drugs, and are going to do so whether they have Marshall and Scott’s permission to do so or not.

Lesson 2: Most people like to make money, and some are going to do so by providing drug users with drugs, whether they have Marshall and Scott’s permission to do so or not.

Lesson 3: The kind of people who are willing to make money without the permission of Marshall and Scott are also willing to kill to keep making that money.

Lesson 4: There’s nothing Marshall and Scott can do to change Lessons 1, 2, and 3.

Those lessons explain why we don’t very often see aspirin or beer distributors gunning their rivals down on the street.

When customers can walk into a variety of stores to buy what they want (in known quantity, quality, and strength), and when trade disputes can be settled with lawyers rather than with guns, everyone’s a lot safer.

Marshall and Scott don’t want you to be safer. They want you, and those who sell you the things you want, to live in terror of their disapproval. They are, in a word, terrorists.

Oddly enough, they’re also both veteran drug dealers themselves — Marshall as a prescription-writing obstetrician, and Scott as a “healthcare executive” who parlayed a fortune made facilitating Medicare fraud into a career in politics.

The continuing terror campaigns they order and sanction — from abducting merchants and customers off the street and putting them in cages, to deploying cops and troops abroad to violently suppress dealers — guarantee that their opponents will likewise turn to terror.

Marshall, Scott, and the cartels are mutually supporting peas in a rotten pod.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

PUBLICATION/CITATION HISTORY